Shrinking Housing Inventory Threatens Housing Affordability

Housing affordability was one of the hidden jewels of the post-boom housing market, as falling home prices offered prospective buyers one of the best opportunities in decades to enjoy the benefits of homeownership.

As the latest quarterly report from the National Association of Realtors shows, though, falling housing inventory levels nationwide have led to rising home prices across the nation, stalling the housing market’s continued trend towards greater and greater home affordability.

NAHB Housing Opportunity Index

73.8 percent of all new and existing-home sales in the second quarter were affordable to families earning the national median income (set at $65,000).

That’s down from 77.5 percent in the first quarter, and the NAHB, like NAR, chalked it up to rising prices, which increased in the second quarter for 92 percent of the metros it studied.

Of course, the slight dip in housing affordability is not a bad thing, but an opportunity for agents, as NAHB Chairman Barry Rutenberg highlighted in comments accompanying the HOI report.

“The decline in the latest HOI is a positive development because it is another signal that the housing recovery is starting to take root,” he said, “and it lends needed confidence to prospective buyers and sellers who have been reluctant to move forward in the current marketplace.”

That reluctance, as many agents know, has contributed to a substantial pent-up demand for real estate, and now that the irregular market conditions of the post-boom marketplace seem to be waning, it could be enough to motivate buyers and sellers to enter the market.